Vehicle insurance premium to go up
By:
Milan Mani Sharma
Insurance Board (IB), the insurance regulatory authority, is
enforcing a new vehicle insurance tariff, which makes policyholders pay more for
the service but also ensures them better returns from the company. “We are
adjusting the rate of vehicle insurance on the higher side, as the degree of
risk in the transportation sector has increased significantly with the number of
vehicles, as well as rate of accidents increasing sharply over the years,” an IB
official told the Post. However, he added, the change being affected on premium
was nominal, while the extent of coverage and facilities ensured against it was
more pronounced in favor of policyholders. Among others, the new General Rules
for Vehicle Tariff will tighten companies on provisions related to third party
liability, the source stated. Once it comes into effect, the new rules will
make it mandatory for the companies to bear instant liability of Rs 25,000 (on
behalf of the policyholder) in case the accident victim dies. “The company will
need to pay Rs 25,000 as ‘no-fault liability’ to victim of accident,
irrespective of the cause (and faults) of the accident,” said the source. There
was no such provision earlier.
The rules also propose significant increment in the amount of
death compensation from the existing Rs 17,500. However, it does not specify
the amount, as the provision is currently dealt with in the Transport Management
Regulations and any change in that amount can be done only be amending those
regulations. “We have already recommended the Transport Management
Department to take appropriate steps to change this provision,” the official
said. Likewise, the rules increase the companies’ third party
liability for passenger vehicles to a maximum of Rs 600,000 from existing Rs
300,000. it further provisions
insurers to cover 100 percent of medical bills as well. The IB official further
said that the changes in tariff were mooted after extensive analysis of vehicle
insurance business showed that existing premium rates were not sufficient to
back up claims the companies received.
Currently, the premium tariff for private vehicles stands at
2 percent of the insured sum, while that for commercial vehicles and motorcycles
stands at 1 percent and 0.5 percent of the insured sum.The review in the tariff was initiated as per the demand of
the insurers since they have been arguing for an increment in the tariff for the
last three years to address changes in the market composition, net premium, and
net claim paid ratio. Vehicle insurance and primarily the commercial vehicles
insurance business is a loss-making business in the country, according to the
officials.
Source: The Kathmandu
Post, March 24, 2005
keyterms: insurance, car, economic loss,
accident, vehicle, safety, Nepal
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